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Note 4 - Managing Uncertainties

Australian Institute of Aboriginal and Torres Strait Islander Studies

NOTES TO THE FINANCIAL STATEMENTS

for the period ended 30 June 2019

Managing Uncertainties

4.1 Financial Instruments

2019

2018

$'000

$'000

4.1A: Categories of Financial Instruments

Financial Assets under AASB 1391

Loans and receivables

Cash on hand or on deposit

10,179

Fixed term deposits with a bank

16,716

Receivables for goods and services

314

Interest receivable

53

Total loans and receivables

27,262

Financial Assets under AASB 91

Financial assets at amortised cost

Cash on hand or on deposit

6,316

Fixed term deposits with a bank

23,617

Receivables for goods and services

208

Interest receivable

70

Total financial assets at amortised cost

30,211

Total financial assets

30,211

27,262

Financial Liabilities

Financial liabilities measured at amortised cost

Trade creditors and accruals

2,293

2,092

Total financial liabilities measured at amortised cost

2,293

2,092

Total financial liabilities

2,293

2,092

1 There is no change in the carrying amount of financial assets or liabilities as at 1 July 2018 following the application of AASB 9.

4.1B: Net Gains or Losses on Financial Assets

Financial assets at amortised cost

Interest revenue

636

466

Net gains on financial assets at amortised cost

636

466

Net gains on financial assets

636

466

Australian Institute of Aboriginal and Torres Strait Islander Studies

NOTES TO THE FINANCIAL STATEMENTS

for the period ended 30 June 2019

Accounting Policy

Financial assets

With the implementation of AASB 9 Financial Instruments for the first time in 2019, the Institute classifies its financial assets in the following categories:

  1. financial assets at fair value through profit or loss;
  2. financial assets at fair value through other comprehensive income; and
  3. financial assets measured at amortised cost.

The classification depends on both the Institute's business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised when the Institute becomes a party to the contract and, as a consequence, has a legal right to receive or a legal obligation to pay cash and derecognised when the contractual rights to the cash flows from the financial asset expire or are transferred upon trade date.

Comparatives have not been restated on initial application.

Financial assets at amortised cost

Financial assets included in this category need to meet two criteria:

  1. the financial asset is held in order to collect the contractual cash flows; and
  2. the cash flows are solely payments of principal and interest (SPPI) on the principal outstanding amount.

Amortised cost is determined using the effective interest method. Amortised cost approximates fair value.

Effective interest method

Income is recognised on an effective interest rate basis for financial assets that are recognised at amortised cost.

Impairment of financial assets

The simplified approach for trade and contract receivables is used. This approach always measures the loss allowance as the amount equal to the lifetime expected credit losses. A write-off constitutes a derecognition event where the write-off directly reduces the gross carrying amount of the financial asset.

Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities. Financial liabilities are recognised and derecognised upon ‘trade date’.

Financial liabilities at amortised cost

Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. These liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective interest basis. Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

Settlement is usually made within 30 days or as per terms in the contractual arrangements.